Tuesday, 20 January 2015

Can the limited-equity co-op relieve the American affordable housing crisis?

Susanne Schindler/Places Journal.org

October 2014

The Bloggers Comment Co-ops may be the future of housing affordability. A far more intelligent, and a far more advanced approach would be to create sufficient, and largely accurate amounts of new money electronically. This would be possible, and successful if we had a highly accurate "scientific" understanding of the economy (with uncertainty factored into it), along with powerful super flexibile electronic controls for dealing with any inflationary pressures. These "controls" could be phased in to replace taxation, and interest rates. http://www.p2pfoundation.net/Transfinancial_Economics

In America we have an escalating crisis of affordability in housing — yet we are overlooking one of the best and most basic solutions.
In recent years the appeal of suburbia has declined and cities are once again booming. But while new residential towers are rising in Manhattan and San Francisco, it’s increasingly difficult for anyone not working on Wall Street or in Silicon Valley to find a place to live. As economics reporter Shaila Dewan wrote recently in The New York Times Magazine:

The developed world’s wealthiest cities are facing housing crises so acute that not only low-income workers, but also the middle and creative classes, find them increasingly difficult places to afford.

Dewan points out that the problem is made thornier still because some of the usual solutions — subsidizing rents, constructing new buildings, improving public parks, schools, and transit — can actually intensify unaffordability; they can make the city even more desirable and ultimately push out the very people they are trying to help. All of which raises a telling question: Why aren’t policy makers in the United States embracing housing models that avoid this unvirtuous cycle — models outside the private market? Why aren’t American policy makers pursuing diverse forms of housing ownership and financing, from new lending and tax policies to housing trust funds to community land trusts? More specifically, why aren’t they encouraging non-profit, limited-equity cooperative housing? Some of the priciest cities in Europe, including Zürich, Vienna, and Munich, have successfully embraced the non-profit cooperative, and as a result these cities benefit from housing that is not only more affordable but more innovative as well. The failure of U.S. policy makers to respond more creatively to the growing crisis is yet more puzzling when we recall the vital legacy of alternative housing that played such a strong role in the urban revival of recent decades.
What follows is a series of reflections on cooperative housing — and on what American cities might learn from other parts of the world, and more, from the rich history of non-profit cooperative housing right here at home.

Berlin, Montevideo, New York: an education in cooperative housing

Full disclosure: I have never lived in or been a member of a cooperative; at least not yet. My first exposure to non-market housing was at architecture school in Berlin, in the mid-1990s, where we studied the famous central European reform housing, or Siedlungen, of the early 20th century. From the distance of decades, it seemed practically an historical inevitability that no matter the style — from the traditional garden cities of Paul Schmitthenner to Mies van der Rohe’s variations on the international style — many of the settlement houses were developed as Genossenschaften, or cooperatives. As such they were common interest and non-profit: each resident purchased a share; participated in decision-making on the basis of one vote per household; and paid monthly fees to support both regular maintenance and periodic capital investments. The resale value of a share was determined by the cooperative’s statutes and adjusted for inflation; but it was not subject to market speculation — the whole point of the cooperative model was to keep costs reasonable and housing affordable. Which it did; and at the turn of 21st century, in post-Wall Berlin, I discovered that non-profit cooperatives continued to flourish. As they still do; some are municipally supported housing corporations, which often take the form of high-rise versions of the early modernist housing estates, and others are smaller upstart projects, some organized by architecture students who claimed formerly state-owned tenements in order to secure their affordability and have a say in their redesign. Thus did my education form my vision of a cooperative: a non-profit housing venture with below-average costs and above-average architecture. 1My next experience with cooperatives was in Montevideo, where, still a student, I interned with the Federación Uruguaya de Cooperativas de Vivienda por Ayuda Mutua, or FUVCAM, Uruguay’s national association of mutual aid housing societies. There I discovered a cooperative tradition which had emerged in the late 1960s, and, with the backing of labor unions, produced some of the best-designed housing on the urban outskirts — low-rise brick and concrete residences, similar to contemporary projects in Scandinavia and the United Kingdom, in which future occupants invested sweat equity rather than capital. As in Central Europe, I found in South America a cooperative movement that combined social and architectural experimentation. (And also as in Europe, it was a tradition with a distinct political orientation — just as the early era of reform housing in Germany ended with the rise of National Socialism, so too the construction of cooperatives was halted during Uruguay’s military dictatorship of the ’70s and ’80s.) By the time I arrived, in the late ’90s, FUVCAM was back to full speed, now working primarily with impoverished households, focusing on the rehabilitation of historic inner-city buildings and the organization of illegal squatters on the city’s periphery— further evidence that the cooperative model was vital and adaptable. 2
A few years later I relocated to North America, where my education in cooperatives has continued. Though at first it was hard to figure out exactly what “cooperative” meant on this side of the Atlantic — the term seemed to be used almost interchangeably with “condominium.” Certainly in the real estate listings, the prices of “co-ops” and “condos” were comparable, as was the housing stock. Only in time did I discover that New York City has an especially rich heritage of cooperatives, market rate as well as non-profit: the city’s first stock co-op, The Rembrandt, was built in 1881, in response to the growing demand for upper-middle-class multi-family apartment buildings (the developers marketed the property as a “home club” that sought “people of means and good social standing”); the limited-equity model would follow in the early 20th century. Only in time did I discover that Co-op City — that rampart of 35 residential towers in the Bronx, begun in the late ’60s along Interstate 95 — was a functioning non-profit development, and in fact the largest in the world, with more than 15,000 households owning shares in a limited-equity cooperative and thus agreeing that apartments could be resold only at a set price, not at market value. Only in time did I learn that many tenements on the Lower East Side and in the South Bronx were also limited-equity co-ops, owned by their former tenants; the city, which had repossessed numerous tax-delinquent properties in the recessionary ’70s, had been eager to sell them back to occupants, and it even established the Urban Homesteading Assistance Board to facilitate the self-help process. And only in time did I learn that the mysterious term “Mitchell-Lama” — which you often hear when someone confesses to a miraculously low rent for a spacious apartment in a nifty postwar high-rise — was a state and municipal program launched in 1955 for the construction of middle-income rental and cooperative housing.
So there it was: the cooperative model I had gotten to know in Berlin and Montevideo, at work in New York City, in an equally broad range of shapes and forms.Co-op City, The Bronx, New York. [Photograph by Eric Woods, via Flickr]Penn South Cooperative Housing, New York, ca. 1962. [via Kheel Center, ILGWU Collection, Cornell University]Amalgamated Dwellings cooperative, New York, built 1930. [Photograph by Joel Raskin, via Wikimedia Commons]But there was a critical difference between the cooperative housing in Germany and Uruguay and in America. Most of the limited-equity programs in New York were time limited: most enabled owners or occupants to opt out of their non-profit status once a subsidized mortgage had been paid or a city contract expired. Which is why today one after another apartment building that for decades provided good housing for lower- and middle-income residents (and countless members of what we now call the “creative class”) is evicting long-time tenants or quadrupling rents. Which is why today the Amalgamated Dwellings on the Lower East Side, developed in 1930, and many of the nearby high-rise residences developed by the United Housing Foundation in the ’50s, all sponsored by needle-trade labor unions, allow units to be sold at market rates — and why so many apartments built for trade workers are now available only to the more generously compensated employees of our post-industrial economy. 3 And which is also why residences like the Penn South Mutual Redevelopment Houses, in the midst of booming Chelsea, built in the early ’60s by the UHF and the International Ladies Garment Workers Union and which remain cooperative and non-profit, are no longer processing applications — and why a recent lottery just to get on the waiting list drew almost 50,000 entries.

Zürich: Genossenschaft Kalkbreite

Zürich is, like New York, a prosperous and expensive city, an international banking center with an ample share of the global 1 percent. Yet unlike New York, it has sought successfully to maintain a range of residential options: since the early ’90s, the municipal government has been promoting mixed-income housing — especially large apartments suitable for families with children — in the formerly industrial west side. Cooperatives are particularly popular, and they are being founded by diverse groups — building trades interested in generating work, artists seeking to convert former factories into long-term creative communities, activists intent on keeping neighborhoods diverse. Cooperatively owned non-profits now constitute 22 percent of housing in the Swiss city; and while the majority were built from the 1920s to the 1970s, approximately one-third — about 5,400 apartments — have been constructed just since 2000.
The Kalkbreite cooperative, which opened to residents in spring of this year, is a recent and remarkable example. Located in central Zürich, the 1.5-acre parcel in Kreis 4 — bounded on two sides by busy thoroughfares and on another by below-grade train tracks — had been occupied by a tram depot, and had long been considered too noisy for housing. But in 2006 a group of activist citizens and housing experts held a series of public workshops, and together they took a new look at the old site. Soon the Cooperative Kalkbreite was incorporated, and by 2007 the group had submitted a proposal to the city. This time the authorities were convinced; and what persuaded them was the broad and generous vision. As presented by the cooperative board, Kalkbreite would encompass 54,000 square feet of commercial space and 80,000 square feet of residential space. The project would feature 97 apartments and would accommodate 250 residents of diverse income, ethnicity, and age; it would include a new tram depot with a public park on its roof; it would be socially inclusive and environmentally sensitive.Cooperative Kalkbreite, Müller Sigrist Architekten with Freiraum Architektur, Zürich, 2014. [Photograph by Christian Brunner]The residential options were breathtakingly intricate and innovative. The cooperative design responded to changing demographics and the need for multiple household configurations. There were apartments with two, three, four, or five bedrooms for traditional nuclear families; apartments with up to seventeen bedrooms for extended households; and studios with bathrooms and kitchenettes grouped into larger “clusters” with shared common space and a communal kitchen. There would an extra-large group of twenty apartments for fifty residents who would together fund a staffed kitchen; and to allow for the usual household flux — e.g., a grandparent arriving to help the parents of a newborn, a visiting professional in town for a project — there would be nine “jokers,” small units (about 290 square feet) with private bathrooms but no kitchens, distributed throughout the project and available for temporary rental for residential use.
This programmatic mix is an achievement in itself. Within a single building it addresses the kind of demographic diversity and programmatic flexibility that U.S. municipalities have struggled to foster across entire cities — with only fitful success — through initiatives that encourage accessory dwellings, shared housing, or micro-units. 4 And at Kalkbreite the social vision is complemented by a commitment to resource conservation. To this end the cooperative made several key decisions: to optimize the excellent on-site transit connections and forego car parking entirely, instead providing ground-floor storage for several hundred bicycles; to adhere to Switzerland’s rigorous Minergie-P-Eco standards for passive housing construction; and to limit the floor area per resident to 344 square feet, much lower than the 485 square feet now typical in Swiss housing. This last decision allowed Kalkbreite to offer an unusually large number of multi-bedroom apartments — a notably family-friendly approach compared with the current trend toward pod-like micro-units in many high-priced cities.Cooperative Kalkbreite, 2014. [Photograph by Volker Schopp]Cooperative Kalkbreite, 2014. [Photograph by Volker Schopp]Cooperative Kalkbreite, Badener Strasse, 2014. [Photograph by Volker Schopp]To propel the project from concept to reality, the municipal authorities granted the Kalkbreite cooperative a 95-year lease on the city-owned land (which enabled the cooperative to qualify for private construction loans). Meanwhile the city council approved 3,25 million Swiss francs (approximately the same amount in U.S. dollars) for a feasibility study, predevelopment costs, and an architectural competition. The competition — standard process for projects with public involvement in Europe — yielded 55 proposals; Müller Sigrist Architekten, along with landscape architects Freiraumarchitektur, were the winners. Construction of the 63-million-Swiss-franc project began in early 2012 and was completed, on schedule, in late summer of this year.
Demand has been strong. By spring 2014, almost 900 people had paid the refundable membership fee of 1,000 CHF (again, about the same in U.S. dollars) and joined the cooperative — the first step in applying for residence. Res Keller, a member of the development team, described this to me in a phone conversation, with obvious satisfaction, as “an ur-form of crowdsourcing.” 5 When I visited the nearly completed project, earlier this year, the first residents had been selected according to criteria stipulated in the cooperative’s statutes — an ethnic, gender, age, and income mix. A glance at the overview of apartments and prices on the walls of the management office — where I saw, for instance, that a three-bedroom, 1,020-square-foot unit required an equity deposit of 25,000 CHF and monthly payments of 1,854 CHF — made it plain that Kalkbreite is indeed meeting the goal of providing below-market-rate housing. And it is attempting to advance broader ideals of social inclusion: while the majority of apartments are targeted to middle-income occupants, the statues allow 20 percent to be rented to high-income residents and permanently reserve eleven units for low-income households. All are full members of the cooperative. 6Cooperative Kalkbreite, inner courtyard, 2014. [Photograph by Volker Schopp]Cooperative Kalkbreite, inner courtyard, 2014. [Photograph by Volker Schopp]

Back to New York … and back to the future?

So what can the United States learn from this project in Switzerland? What can the famously freewheeling American housing market learn from a European project organized around public transportation, dedicated to resource conservation, and unafraid to engineer a mix of residents? What can New York City, the historical center of the American limited-equity co-op movement, but today one of the world capitals of inequality, learn from a city one-twentieth its size?
I would argue that the lessons are at once practical and philosophical. The practical lessons are relatively straightforward. City, state, and federal entities need to establish or strengthen the financial and legal frameworks that encourage not just the establishment but also the durability of non-profit cooperatives like Kalkbreite — frameworks that would enable diverse funding sources, encourage programmatic and design innovation, and provide access to land (e.g., by requiring cities to lease rather than sell their properties). The philosophical challenges are clearly more difficult. To reinvigorate the tradition of non-profit cooperative housing will require that we shift our attitudes about the complex relationship of housing to the market. Which is to say we need to rethink longstanding political and cultural biases: that the goal of home ownership is to accumulate wealth, and that cooperative living and public subsidies are somehow “socialistic.” We need once again to embrace what is known in social activist circles as “permanent affordability,” and thus encourage ownership and financing mechanisms in which housing is understood as a bedrock component of stable and diverse communities rather than as a source of speculative profit or the basis for arcane financial innovation. 7
In High Life: Condo Living in the Suburban Century, historian Matthew Lasner provides a fascinating history of multifamily home ownership in the United States, from the rise of cooperatives in the late 19th century to the more recent “condo-mania” that began when condominiums were legalized in the 1960s. Lasner reminds us that co-ownership has long been a vital option of American housing — even in the “suburban century” that saw the idealization of the single-family house. 8 Whether to ensure that decent affordable housing can endure through the cycles of the real estate market, or to allow apartment dwellers to participate in the management of their buildings, many Americans have chosen what Lasner calls this “third way” between renting and owning; as he says, for much of the 20th century it was widely recognized as a useful means to the ends of “affordability, control, and community.” About the origins of the non-profit model, he writes:

For … housing reformers in the 1920s, the coop proved not just a third way between the suburban house and the city rental, and between the “public” apartment and the “private” home, but between the laissez-faire real-estate market and full state ownership of real property. 9

By the mid 1970s, non-profit developers had built almost 250,000 limited-equity co-ops in the United States, three-quarters of which were in metropolitan New York, “a solid legacy of well-built, well managed housing,” as Lasner says. 10 Yet despite its impressive record, this housing model has in recent decades all but disappeared from the American housing scene. Recently built examples of “affordable cooperatives,” such as the much-discussed Via Verde project in the South Bronx, effectively function like condominiums in management and resale. And after the crash of the housing market, in 2008, banks have been especially hesitant to lend to cooperatives, given the more complicated mechanisms associated with collective management. Earlier this year New York Mayor Bill de Blasio, who campaigned on the promise to end the “tale of two cities,” announced that he would commit public funds to build more affordable housing — but as The New York Times reported, so far his plans contain “few ideas that would rattle real estate developers.” And to date the non-profit model does not emerge as a significant option in his administration’s plans.
So the question still presses. Given the strong legacy of non-profit cooperatives and the ongoing appeal of the few that have persisted — Lasner calls Penn South one of the “isolated reminders of the great possibilities of the cooperative commonwealth” 11 — why aren’t politically engaged citizens and housing organizers joining together to lobby for renewal of the old model? Why aren’t we all looking to the past, and looking across the ocean, to build a better future for urban housing?

Author's Note

Thanks to Jesse Keenan, Alan Mallach, Andrew Reicher, Tony Schuman, and Bea de la Torre for conversations on the prospects of limited-equity cooperatives in the United States; to Fabian Furter, Anne Kockelkorn, and Kathrin Siebert for a joint reading group that put the issues into a broader framework, internationally and historically; and to Juliette Spertus and Jacob Moore for insightful comments on a draft of this article.

Seward Park and Penn South, as well as Co-op City, were designed by architect Herman Jessor. For a history of Jessor’s non-profit projects, see Tony Schuman, “Labor And Housing in New York City: Architect Herman Jessor and the Cooperative Housing Movement.” Unpublished paper, New Jersey Institute of Technology, undated. For a broader history of cooperative housing in New York City, see Richard Plunz, A History of Housing in New York City (New York: Columbia University Press, 1990); and for a history of the role of labor unions in housing, see Hilary Botein, “Solid Testimony of Labor’s Present Status:” Unions and Housing in Postwar New York City. (PhD Dissertation. Columbia University, New York, 2005). ↩

The Kalkbreite employs a density calculation which is based on the number of people, and not (as is typical in Europe and the United States) on the number of dwelling units or gross square feet per acre. This is a smarter and more accurate way to quantify and accommodate the range of lifestyles that might actually develop in a particular building. On efforts to achieve housing diversity in New York City, see Making Room, an initiative organized by the Citizens Housing and Planning Council and the Architectural League with the goal of reforming zoning and building codes to expand the range of housing options. ↩

For those with additional equity to invest, the cooperative has set up a version of a savings bank (Depositenkasse) for deposits between 5,000 and 100,000 CHF, and offers an annual interest rate of 1 to 1,5 percent, more than currently paid by commercial banks. To help those with short-term financial difficulties, the cooperative has also set up a solidarity fund (Solidaritätsfond), where members can place extra equity to help others. ↩

In an email, Res Keller notes that some older cooperatives with many housing units have significantly lower equity requirements. Swiss law allows individuals to use their pension savings, at no penalty, to purchase a share in cooperative housing, which helps to make this a viable option for low-income households. Keller also points to the central role played by pension funds in the financing of new cooperative developments; the city of Zurich’s employee pension fund provides the critical funding to bridge private bank loans and the residents’ equity. ↩

For reflections and historical case studies on the fundamental shift in housing policy from a broadly public to a largely market-based system in the mid-1970s, as well as its impacts on architecture discourse, see Candide: Journal for Architectural Knowledge, 07 (October 2013), co-edited by Anne Kockelkorn and the author. ↩

For more on the complicated history of American housing, and the mutual interdependencies between policy, finance, and design, see the exhibition “House Housing: An Untimely History of Architecture and Real Estate in Nineteen Episodes,” co-curated by the author and Jacob Moore. This is part of the ongoing research on the topic at Columbia University’s Buell Center for the Study of American Architecture, directed by Reinhold Martin. ↩

Matthew Gordon Lasner, High Life: Condo Living in the Suburban Century (New Haven: Yale University Press, 2012), 91. ↩

Thursday, 8 January 2015

Cosma Shalizi is an assistant professor of statistics at Carnegie Mellon University, where his research focuses on aspects of the statistical analysis of complex systems: nonlinear prediction algorithms, heavy-tailed distributions, contagion in networks, and self-organizing processes. Previously, he was a post-dcotoral fellow at the University of Michigan's Center for the Study of Complex Systems and at the Santa Fe Institute, where he is now an external faculty member. He got is Ph.D. in theoretical physics from the University of Wisconsin-Madison in 2001.

My Content

We derive generalization error bounds -- bounds on the expected inaccuracy of the predictions -- for traditional time series forecasting models. Our results hold for many standard forecasting tools including autoregressive models, moving average models, and, more generally, linear state-space models. These bounds allow forecasters to select among competing models and to guarantee that with high probability, their chosen model will perform well without making strong assumptions about the data generating process or appealing to asymptotic theory.

My Video Content

About the Interview

Cosma Shalizi urges economists to stop doing what they are doing: Fitting large complex models to a small set of highly correlated time series data. Once you add enough variables, parameters, bells and whistles, your model can fit past data very well, and yet fail miserably in the future. Shalizi tells us how to separate the wheat from the chaff, how to compensate for overfitting and prevent models from memorizing noise. He introduces techniques from data mining and machine learning to economics -- this is new economic thinking.

My Grants

This project will bring new mathematical tools and ideas from high-dimensional statistics to bear on the problem of creating reliable macroeconomic forecasting models, ones which not only predict well out of sample but also support the sort of counterfactual reasoning needed for scientific explanation and policy evaluation. The proposed work draws extensively on, but goes beyond, the results of the researchers’ previous Institute grant on application of statistical learning methods to macroeconomics.

Cosma Shalizi, Mark Schervish, and Daniel McDonald of Carnegie Mellon University were awarded a grant by the Institute for New Economic Thinking to extend proven techniques in statistical learning theory so that they cover the kind of models and data of most interest to macroeconomic forecasting. The dominant modeling traditions among academic economists, namely dynamic stochastic general equilibrium (DSGE) and vector autoregression (VAR) models, both spectacularly failed to forecast the financial collapse and recession which began in 2007, or even to make sense of its course after the fact.

There is an experimental platform imagined in the classic 80s film Tron where all forms of research can be carried out at unparalleled speeds. It was called The Grid, and 30 years on, this futuristic machine has become a reality.Down in a series of vast underground caverns and tunnels beneath France and Switzerland, the Large Hadron Collider is about to switch on again after two years of fine-tuning and upgrades. When it does, it will be operating at twice the energy and producing an enormous, mind-blowing quantity of data. And all of that data will be processed by the Grid.The GridThe numbers involved are huge.When the switch is flicked in the new year the Grid will start to consume 160,000 gigabytes of information every day. That works out at 70 petabytes a year. To give you an idea of size, one petabyte is big enough to store the entire DNA material of everyone in the USA.But how does the Grid cope with such a large amount of data?Big dataThe Grid is a global network of computers, originating in CERN, that quickly processes and shares the big data generated by the trillions of collisions in the Large Hadron Collider. Like its futuristic forbear in Tron, the Grid is incredibly quick. It is composed of hundreds of thousands of processors working in parallel, and it also comprised of a series of Tiers that pass the data along the line, refining as it goes. This enables the information from the experiment to be shared almost in real time with scientists anywhere around the globe.Handling the dataBut the key to its success is not archiving all the data, but reducing it to a manageable level. CERN’s data expert Pierre Vande Vyvre has spoken recently about the future for big data processing. He says that the role will change to standard algorithms that can do the heavy lifting first and reduce the data to a more manageable size before it gets close to human analysis. “The big science workflows are mainly data reduction. Currently just 1% of data from collision events [at the Large Hadron Collider] are selected for analysis. The archiving of raw data is not the standard anymore.”What can big science teach us about big data?CERN is well prepared. They can handle their data. Like the best big science projects, they have a clear theory which they are testing against the data, and they have set up clear parameters that can narrow the data. They also have the in-house skills to analyse what they find.It's an important framework for dealing with big data that companies and governments could learn from, all of which are setting up their own big data initiatives to help them make predictions about the future.Big predictionsThe Obama administration recently launched a $200 million R&D initiative to 'improve the government's ability to extract insights from digital data', Google has been trying to map flu trends by studying search queries, and Amazon has been using customer data to try and automate our choices for years. All of them are chasing the big data dream.But it's when you start to use big data to try and predict future behaviour that you get stuck. The data is based on social systems which are fraught with unpredictable changes. Unless you understand all future variables, big data for prediction can only tell us more about the past or the present than the future. As Juan Mateos-Garcia argues, “Big data is lurking with biases, mirages and self-fulfilling prophesies. Avoiding them requires access to the right skills and organisation”.Big data needs big judgementOperations like the Grid at CERN point the way to better management and analysis of huge data sets. Crucially, they not only have the skills to build the sensors and the computing architecture to deal with the massive flow of data, they also have the judgement to reduce the data and to analyse it afterwards. Big data is still a judgement call. Despite companies investing heavily in big data processes, most do not have the skills to analyse what is coming in. It's a problem, and an opportunity, that we've set out in our report Model Workers.The end of theoryChris Anderson - the idealist TED leader – made the bold call that big data will spell the end of all theory. Like the Master Control Programme in Tron, big data algorithms will work many times faster than a human and will be able to answer our global problems before they arise.It is misplaced because it is naïve to assume that machines can make decisions about what data to collect and how to interpret the patterns in that data as information for other machines to use. It feels like the techno-utopian belief that brought the world market to its knees in 2008. Here the idea that computers can measure, control and self-stabilise societies was proved dramatically wrong when the complex algorithms that ran financial markets failed to predict the giant debt bubble. Adam Curtis carefully dismantled this dream of computers running things in his brilliant TV series ‘All Watched Over by Machines of Loving Grace’ (2011). The danger now is that the predictive power of big data is feeding the same fantasy that leads to the same distortion and simplification of the world around us.Keeping big data humanWhen it is switched back on the data processed by the Grid will make the Large Hadron Collider the biggest of the Big Science experiments in the world. But it won’t be the machines peering into the underlying structure of the universe. That’s up to us.

Image: The Grid's Tier 0 data center courtesy of CERN.

- See more at: http://www.nesta.org.uk/blog/big-data-needs-big-judgement#comments

Last weekend’s FutureFest explored a whole range of possible worlds – and its lingering message was the need to cultivate greater awareness and agency to shape our own future together.
There are a great many things we don’t know about the future, but what we can know, with some degree of certainty, is that when today’s babes in arms are twenty years old, their fundamental needs and desires as biological beings and as social animals are likely to be the same as they are today.
They will still need food, heat, light, shelter, a mode of transport. Still need clothes, furniture, tools and technologies. Some of those things might look very different than they do today, but they will still be needed.
People will still want freedom and resources to explore the things they’re really interested in; music, being with friends, developing skills and talents. They’ll want meaningful work, a sense of purpose.
But the way we get hold of those goods like clothes, kit, cars; the way we earn and borrow money, and who we interact with to meet those needs and desires could be completely reconfigured. The surface result may look similar. But flip the board and the wiring underneath may have changed quite fundamentally.
And the reason we can intuit this change is that this reconfigured future is here right now. The primordial building blocks of the collaborative economy are here, fumbling toward each other.

The collaborative economy today

If you’d made use of a Boris Bike or a ZipCar, you have participated in a new, collaborative economy. You’ve made a decision to access something rather than owning it outright. There is a wave of innovation that is seeking to shift us from a culture of ownership, to a culture of access. We are beginning to perceive more clearly that the value of a thing is the beauty of the function it performs. Not the thing itself.
I’ll take a guess that most of you have converted to some form of access over ownership when it comes to digital entertainment such as film and music. But what else is on offer?
If I need a printer, I can go and buy one. Or I can look on Streetbank and see whether anyone in my area is up for lending or giving away a printer. If I want to make a bit of money by renting out my printer, I can post it on Ecomodo; along with any other rarely used item that might earn me a few pounds.
The internet is awash with hyperlocal platforms dedicated to connecting supply and demand of physical stuff in local communities.
Sign up to Mudjeans and I can lease my jeans and when they lose that certain something (that all jeans do) I can return them and get sent another pair. I can increase the size of my wardrobe by a factor of thousand by accessing my new clothes through 99 dresses. Paying – literally – buttons for them.
I can ‘Shave Time’ and ‘Shave Money’ by hiring razor blades instead of buying and binning them when they’re blunt with the Dollar Shave Club. If I can’t afford – or can’t stomach – to pay for weighty text books, I can rent them from Chegg.com.
One of the defining characteristics of many of these new platforms, is that they are peer to peer, bypassing traditional institutions to get what you want.
So I could borrow money from the bank, or I can go to Zopa and borrow money from an individual at a competitive rate of interest. If I want to raise money, learn a new skill, seek advice, get my meals cooked for me, park my car, lodge my dog while I’m on holiday, find a place to stay, take a ride somewhere, use a courier or buy insurance – all these needs and more, I can now meet by using platforms to connect with other every-day people, bypassing traditional layers of middlemen and sourcing from completely new kinds of providers.
It’s a phenomenon on the rise and the collaborative economy is now worth £330bn globally and £22.4bn in the UK. New kinds of marketplaces are emerging, seeking to connect you to everything you may want or need.

Why now?

Commentators are keen to explain the reasons why the collaborative economy is emerging. Some argue that this wave of innovation is being driven by financial and environmental pressures; that the combination of less money flowing around and the fear of dwindling natural resources and overflowing landfill is the driving force behind it. Others argue that it’s about changing demography.
Some maintain it’s because we have a desire to reconnect with people following a period of materialism and atomisation of society. In other words, it’s come about because at quite a deep and ill-articulated level, we are unsatisfied with our relationship with material things, with big business and with each other.
Some – who don’t look different to any other anarchist that have preceded them in the last hundred years or so – see this as a revolution; an end to capitalism, ownership and government. The rise of a new society that is free, open and stateless.
It is probably being driven by all those things and more. But first and foremost, it’s being driven forward because human beings are powered by and propelled forward by intrigue and imagination. Now that millions of people are able to connect and communicate across the planet in real time, we have begun to exchange and share whatever we can push and pull through those narrow pipes.
Music, pictures, film, stories. We’ve seen an outpouring of creativity; an outpouring of noise that is only really limited by what can be transmitted in a data packet.
Aside: Imagine if there were a teleporter in every home; if the ease of exchanging and sharing physical things were as instant and easy as exchanging and sharing a photo on Facebook. It stops the heart to think of what that would unleash – what it would mean.
In short, we are pushing the possibilities to further exploit networked, digital technologies because as humans we want – desperately – to see what’s possible with the tools that we have in front of us. We’re not substantively different to our ancestors in this regard, looking down at the ground and musing about what might happen if we rubbed a couple of sticks together. It’s why we’re brilliant – and terrifying – creatures.

Dealing with failure

But before we get carried away with tickling our imaginations with what a mature collaborative economy might look like, let’s pause briefly on some of the challenges it will encounter along the way. Because it will falter. Dramatic failed ventures that have been in receipt of generous investment will cause some commentators to herald the collaborative economy as a pointless flash in the pan phenomenon. That’s inevitable.
And there’ll be a number of reasons for those dramatic failures. In some instances the timing will be wrong; the market and people simply won’t be ready for it; in others it will be because the idea (simply) is not any good. Just because you can do something, doesn’t make it a good idea.
But other innovators will learn quickly from these many failures, standing on their shoulders to get a better view of what might work.

How much regulation?

Probably the thorniest issue for the collaborative economy is regulation. There are already some fairly crunchy debates already happening in terms of how these new ventures interact with existing legislation, regulation, licensing and tax systems. And much has been made of AirBnb being made ‘illegal’ in New York, as well as battles between taxi drivers, city councils and the ride share providers Uber and Lyft.
These early battles are the tip of the iceberg and are often fuelled by an existing industry resenting these very new kinds of competitors who are operating on very fundamentally different models that seem to capture the public imagination and seek to confound and evolve existing regulatory frameworks to which they have dutifully complied. There are bound to be some unhappy faces. And they’re likely to get unhappier.
Remember that Napster was the Big Bang behind the total disruption and revolution in the music industry. Publishing, television, film – wherever there has been a possibility to revolutionise business through a digital medium, we have done so.
Where the sea meets the land you get waves. And as the digital world extends beyond itself, to exert its influence further out into the physical world – containing as it does the power to transform and democractise – we can expect those waves to ride high. Some will surf and some will succumb – and the landscape will be re-shaped.

The collaborative economy tomorrow

Let’s cast our imaginations forward twenty years. Imagine all the major battles have been fought and won. Or lost; depending on who you are. Pressures we have with regard to economic instability, depletion of resources and provision for our ageing population will have only increased. But collaborative economy is still here. What will we see?
With the strong caveat that there are clear limitations from always viewing the future from the present we might see:
A rental renaissance with major retailers who traditionally made money through the sale of disposable, short-shelf life products shifting into the rental of highly durable products with readily reusable component parts. We’ll see a radical shift toward the efficient and elegant use of the material resources and products that surround us. And finally, we will focus as much attention and expend as much effort on how to create efficiencies in consumption as we previously invested in creating efficiencies in production.
Big retailers will have made the transition away from product-based organisations to service-based organisations with the most progressive of those evolving into marketplaces serving the rental and exchange of goods and services across peers, small enterprises and communities in an ecosystem of provision.
Some businesses will die. Brands that we know and love today will be long forgotten, unable to transform themselves in the face of so much disruption to their understanding of how the world now meets its needs.
I suspect that most things we own will be tagged, visible and shareable with whoever we choose. This will increase the variety of ways in which I can generate income, changing the way we work or engage in value exchanges – whether that be through lending out physical assets, loaning money, sharing skills, providing care for others etc.

Multiple currencies

This shift will almost certainly lead to us having more than one kind of currency in our pockets. As the collective participants in a collaborative economy begin to recognise different kinds of value, the idea of flat currency will become crude. Access to some of the things I need becomes not based on whether I can pay, but whether I can contribute.
This means we will probably use time as a medium of exchange to access some things we need, engaging in a reciprocal exchange of time in a distributed and networked way. Existing time-banking systems are perhaps the very clunky precursor to this.
We may also use our identity as a form of currency; through demonstrating trust and reliability in one sphere of life, we will use this as an access key to obtain other things. An early precursor to this might be the ability for your Ebay seller rating to be recognised and integrated with other, completely unrelated marketplaces and communities in which you are operating.
Data is likely become a form of currency and local currencies that are peculiar to one geographic location. There are many visions of the future, but in a more dystopian vision, we might well imagine why some communities will want to put a geographical boundary around the sharing of resources. Other currencies will only be used in certain types of collaborative economic activities. And this proliferation of currencies may be as familiar and logical as having a number of different debit or supermarket loyalty cards today.
But the biggest leap from where we are now to where we may be in 20 years’ time is the speed and means by which we give and gain access to those things we need.

The power of the collective community

At the moment, we’re all the equivalent of telephone switchboard operators; making our own connections; inputting our own requests and calls to access the things we need. We are the manual operators of supply and demand. Technology is making the connections possible but it’s not yet (in any meaningful way) sensing or pre-empting the need.
But as networks connect to networks; sensors connect to online systems and the open data that pertains to me, Helen, and everyone else begins to sharpen into more complete and focused picture, the necessity for me and you to be the manual operators of the collaborative economy will cease. The system will learn and know how to connect the wants and needs of the collective community. And use its massive power to try to serve them.
- See more at: http://www.nesta.org.uk/blog/road-ahead-collaborative-economy#sthash.jp82kHjn.dpuf

Wednesday, 7 January 2015

In economics, dematerialization refers to the absolute or relative reduction in the quantity of materials required to serve economic functions in society. In common terms, dematerialization means doing more with less. This concept is similar to ephemeralization as proposed by Buckminster Fuller.
In 1972, the Club of Rome in its report The Limits to Growth predicted a steadily increasing demand for material as both economies and populations grew. The report predicted that continually increasing resource demand would eventually lead to an abrupt economic collapse. Studies on material use and economic growth show instead that society is gaining the same economic growth with much less physical material required. Between 1977 and 2001, the amount of material required to meet all needs of Americans fell from 1.18 trillion pounds to 1.08 trillion pounds, even thought the country's population increased by 55 million people. Al Gore similarly noted in 1999 that since 1949, while the economy tripled, the weight of goods produced did not change.[1]
By most measures, quality of life improved from 1977 to 2001. While consumer demand is constantly increasing, consumers demand services such as communication, heating and housing, and not the raw materials needed to provide these. As a result, there is incentives to provide these with less materials. Copper wire has been replaced with fiber-optics, vinyl records with MP3 players while cars, refrigerators and numerous other items have gotten lighter.[1]

Both the words accounting and accountancy were in use in Great Britain by the mid-1800s, and are derived from the words accompting and accountantship used in the 18th century.[12] In Middle English (used roughly between the 12th and the late 15th century) the verb "to account" had the form accounten, which was derived from the Old French word aconter,[13] which is in turn related to the Vulgar Latin word computare, meaning "to reckon". The base of computare is putare, which "variously meant to prune, to purify, to correct an account, hence, to count or calculate, as well as to think."[13]
The word "accountant" is derived from the French word compter, which is also derived from the Latin word computare. The word was formerly written in English as "accomptant", but in process of time the word, which was always pronounced by dropping the "p", became gradually changed both in pronunciation and in orthography to its present form.[14]

Financial accounting focuses on the reporting of an organization's financial information to external users of the information, such as investors, regulators and suppliers. It measures and records business transactions and prepares financial statements for the external users in accordance with generally accepted accounting principles (GAAP).[7] GAAP, in turn, arises from the wide agreement between accounting theory and practice, and change over time to meet the needs of decision-makers.[1]
Financial accounting produces past-oriented reports—for example the financial statements prepared in 2006 reports on performance in 2005—on an annual or quarterly basis, generally about the organization as a whole.[7]

Management accounting focuses on the measurement, analysis and reporting of information that can help managers in making decisions to fulfil the goals of an organization. In management accounting, internal measures and reports are based on cost-benefit analysis, and are not required to follow GAAP.[7]
Management accounting produces future-oriented reports—for example the budget for 2006 is prepared in 2005—and the time span of reports varies widely. Such reports may include both financial and nonfinancial information, and may, for example, focus on specific products and departments.[7]

Auditing is the verification of assertions made by others regarding a payoff,[31] and in the context of accounting it is the "unbiased examination and evaluation of the financial statements of an organization".[32]
An audit of financial statements aims to express or disclaim an opinion on the financial statements. The auditor expresses an opinion on the fairness with which the financial statements presents the financial position, results of operations, and cash flows of an entity, in accordance with GAAP and "in all material respects". An auditor is also required to identify circumstances in which GAAP has not been consistently observed.[33]

U.S. tax accounting concentrates on the preparation, analysis and presentation of tax payments and tax returns. The United States’ tax system has a complicated set of accounting method characteristic for tax accounting purposes. Although tax accounting largely applies under generally accepted accounting principles (GAAP), a different accounting method may cause a quite different.[35] In the U.S.’s organizational form and taxes: there are four basic forms of business ownerships: the Sole proprietorship, the partnership, the corporation, and the limited liability company. Corporate income taxes structures include corporation and personal income taxes, which contains, sole proprietorship, partnership and limited liability Company. Corporate Income taxes include marginal, which is taxed on each additional dollar of income, average corporate tax rates, which is basic on total tax as a percentage of income, and basic corporate income tax structure. The current corporate-tax rate is from 15 percent to 39 percent.[36] “The current corporate income tax rate is 15 percent on the first $50,000 of income, 25 percent on the next $25,000, 34 percent on the next $25,000, 39 percent on the next $235,000, 34 percent on the next $9,665,000, 5 percent on the next $5000,000, 38 percent on the next $3,333,333, 35 percent on all income above $18,333,333.” [37] The personal- tax rate starts lower than the corporate-tax rate in the lowest brackets to the higher income levels. “15 percent for corporate income of less than $50,000 and 10 percent in the lowest personal brackets for all filing statures for the lowest income, and the highest personal rate of 35 percent never exceeds the highest corporate rate of 35 percent.” [38]

At least a bachelor's degree in accounting or a related field is required for most accountant and auditor job positions, and some employers prefer applicants with a master's degree.[48] A degree in accounting may also be required for, or may be used to fulfil the requirements for, membership to professional accounting bodies. For example, the education during an accounting degree can be used to fulfil the American Institute of CPA's (AICPA) 150 semester hour requirement,[49] and associate membership with the Certified Public Accountants Association of the UK is available after gaining a degree in finance or accounting.[50]
A doctorate is required in order to pursue a career in accounting academia, for example to work as a university professor.[51][52] The Doctor of Philosophy (PhD) and the Doctor of Business Administration (DBA) are the most popular degrees. The PhD is the most common degree for those wishing to pursue a career in academia, while DBA programs generally focus on equipping business executives for business or public careers requiring research skills and qualifications.[51]

Accounting research is research on the effects of economic events on the process of accounting, and the effects of reported information on economic events. It encompasses a broad range of research areas including financial accounting, management accounting, auditing and taxation.[56]
Accounting research is carried out both by academic researchers and practicing accountants. Academic accounting research "addresses all aspects of the accounting profession" using the scientific method, while research by practicing accountants focuses on solving problems for a client or group of clients.[57] Academic accounting research can make significant contribution to accounting practice,[57][58] although changes in accounting education and the accounting academia in recent decades has led to a divide between academia and practice in accounting.[59]Methodologies in academic accounting research can be classified into archival research, which examines "objective data collected from repositories"; experimental research, which examines data "the researcher gathered by administering treatments to subjects"; and analytical research, which is "based on the act of formally modelingtheories or substantiating ideas in mathematical terms". This classification is not exhaustive; other possible methodologies include the use of case studies, computer simulations and field research.[60]

Many laborious practices have been simplified with the help of computer software. Enterprise resource planning (ERP) software provides a comprehensive, centralized, integrated source of information that companies can use to manage all major business processes, from purchasing to manufacturing to human resources. This software can replace up to 200 individual software programs that were previously used. Computer integrated manufacturing allows products to be made and completely untouched by human hands and can increase production by having fewer errors in the manufacturing process.
Computers have reduced the cost of accumulating, storing, and reporting managerial accounting information and have made it possible to produce a more detailed account of all data that is entered into any given system. They have also changed business to business interaction through e-commerce. Rather than dealing with multiple companies to purchase products, a business can purchase a product at a less expensive price and take out the third party and vastly reduces expenses companies once accrued.
Additionally, Inter-organizational information system enable suppliers and businesses to be connected at all times. When a company is low on a product the supplier will be notified and fulfill an order immediately which eliminates the need for someone to do inventory, fill out the proper documents, send them out and wait for their products.[61]

Although financial accounting produces past-oriented reports, it is based on generally accepted accounting principles and generally accepted accounting practices compliant with International Financial Reporting Standards/US GAAP. In order to prepare the financial accounts/reports an entity has to comply with these GAAPs and gaaps. Which of these accounting practices and principles the board of directors choose at the start of the financial period and whatever changes in these generally accepted accounting principles and practices are implemented during the accounting period, affect the entity´s economy and affect the financial accounts (financial reports) prepared at the end of the financial period. When all entities implement the same change during the financial year as required by IFRS/US GAAP, then that affects the entire economy.

The year 2001 witnessed a series of financial information frauds involving Enron, auditing firm Arthur Andersen, the telecommunications company WorldCom, Qwest and Sunbeam, among other well-known corporations. These problems highlighted the need to review the effectiveness of accounting standards, auditing regulations and corporate governance principles. In some cases, management manipulated the figures shown in financial reports to indicate a better economic performance. In others, tax and regulatory incentives encouraged over-leveraging of companies and decisions to bear extraordinary and unjustified risk.[62]
The Enron scandal deeply influenced the development of new regulations to improve the reliability of financial reporting, and increased public awareness about the importance of having accounting standards that show the financial reality of companies and the objectivity and independence of auditing firms.[62]
In addition to being the largest bankruptcy reorganization in American history, the Enron scandal undoubtedly is the biggest audit failure.[63] It involved a financial scandal of Enron Corporation and their auditors Arthur Andersen, which was revealed in late 2001. The scandal caused the dissolution of Arthur Andersen, which at the time was one of the five largest accounting firms in the world. After a series of revelations involving irregular accounting procedures conducted throughout the 1990s, Enron filed for Chapter 11 bankruptcy protection in December 2001.[64]
One consequence of these events was the passage of Sarbanes–Oxley Act in the United States 2002, as a result of the first admissions of fraudulent behavior made by Enron. The act significantly raises criminal penalties for securities fraud, for destroying, altering or fabricating records in federal investigations or any scheme or attempt to defraud shareholders.[65]

Jump up ^Oldroyd, David & Dobie, Alisdair: Themes in the history of bookkeeping, The Routledge Companion to Accounting History, London, July 2008, ISBN 978-0-415-41094-6, Chapter 5, p. 96

Jump up ^Oldroyd, David: The role of accounting in public expenditure and monetary policy in the first century AD Roman Empire, Accounting Historians Journal, Volume 22, Number 2, Birmingham, Alabama, December 1995, p.124, Olemiss.edu

Jump up ^Guthrie, J., Roger Burritt and Elaine Evans. 2011. "The Relationship between Academic Accounting Research and Professional Practice," in Bridging the Gap between Academic Accounting Research and Professional Practice, eds. Elaine Evans, Roger Burritt and James Guthrie. (New South Wales: The Institute of Chartered Accountants in Australia).

About Me

Robert Searle was educated in Windsor at the Royal Free, the Tutorials, and East Berkshire College. He is the originator of two major "work in progress" Paradigms known as Transfinancial Economics (TFE), and Multi-Dimensional Science (MDS).The former believes that new unearned money could be electronically created without serious inflation notably for key environmental, and
socially ethical projects. Multi-Dimensional Science though presents an unique "scientific" Methodology by which claimed psychic, and spiritual "phenomena"could possibly be "proved".
Apart from the above, Searle has proposed the development of the Universal Debating Project, an interactive "encyclopedia" of virtually "all" pro, and con arguments for practically any subject in the world.He is the creator too of a tribute blog on the musician, and broadcaster David Munrow (1942-1976), and a pioneering one on Contemporary Early Music.Furthermore, he has a very large audio-visual collection of Medieval, and Renaissance Music (manually created as Searle8), and has an "unusual" musical project involving improvisation which could also open up a "new" approach to music.